Ethereum ETF Approval Odds Surge: Can ETH Ride Bitcoin's Coattails? In-Depth Analysis

With Bitcoin breaking through $100,000 in 2024, market attention is shifting to the next potential catalyst: the Ethereum spot ETF. Recently, the U.S. Securities and Exchange Commission (SEC) has shown subtle changes in its stance on Ethereum ETF applications, with multiple analysts estimating a significant rise in approval probability. This article analyzes whether ETH can sustain the momentum from BTC's rally, focusing on three dimensions: regulatory progress, price impact, market sentiment, and capital flows.

I. Ethereum Spot ETF Approval Odds Heat Up

Since the approval of Bitcoin spot ETFs in early 2024, Ethereum ETF applications have become a market focus. According to Bloomberg analysts, the probability of an Ethereum spot ETF being approved before May 2025 has risen from about 30% to over 70%. This shift is mainly due to intensive communication between the SEC and multiple applicants, as well as positive signals from the court regarding Grayscale's Ethereum Trust conversion application.

Currently, asset management giants including BlackRock, Fidelity, and VanEck have submitted Ethereum spot ETF applications. Similar to the period before Bitcoin ETF approval, the SEC recently requested applicants to update their prospectuses, which is often seen as a sign of progress in the approval process. Additionally, the Commodity Futures Trading Commission (CFTC) has classified Ethereum as a commodity, clearing some legal hurdles for ETF approval.

II. Potential Impact on ETH Price

If the Ethereum spot ETF is approved, its price impact could unfold in two phases. In the short term, ETH may experience a rapid surge upon the announcement, similar to the roughly 20% immediate gain seen after Bitcoin ETF approval. According to CoinGecko data, within a month of Bitcoin ETF approval, BTC's price climbed from about $46,000 to above $55,000. If Ethereum replicates this trend, it could break through its previous all-time high in the short term.

The medium to long-term impact is more critical. An Ethereum ETF would open the door for traditional capital inflows, especially from institutional investors like pension funds and endowments. Compared to Bitcoin, Ethereum boasts a richer ecosystem of applications—DeFi, NFTs, Layer2 solutions—which could attract more investors seeking "digital asset yields." According to a Messari report, Ethereum's total value locked (TVL) on-chain has rebounded to over $80 billion in 2024, with ecosystem activity far exceeding other public chains.

However, ETH also faces unique challenges. After Bitcoin ETF approval, massive selling from the Grayscale Bitcoin Trust (GBTC) weighed on prices. On the Ethereum side, the Grayscale Ethereum Trust (ETHE) currently trades at a discount of about 15%. If an ETF is approved, arbitrage capital could trigger short-term selling pressure. But analysts generally believe this pressure is temporary, and long-term demand will absorb the supply.

III. Current Market Sentiment and Capital Flows

In terms of market sentiment, Ethereum's "Fear and Greed Index" has risen from 50 (neutral) at the start of the year to 70 (greed), but remains below Bitcoin's 85 for the same period. According to Alternative.me data, social media discussions about Ethereum ETFs have tripled in the past month, with bullish sentiment dominating.

Capital flows indicate that institutions are positioning early. According to a CoinShares report, Ethereum investment products saw net inflows of over $2 billion in Q1 2025, a record high. Inflows into Ethereum ETPs (exchange-traded products) in European and Canadian markets were particularly notable. Meanwhile, open interest in Ethereum futures has also risen to historical highs, suggesting leveraged capital is betting on the move.

Notably, the correlation between Ethereum and Bitcoin is weakening. According to IntoTheBlock data, their 30-day price correlation coefficient has dropped from 0.9 at the start of the year to 0.7, indicating ETH could move independently. Some traders believe that if an ETF is approved, the ETH/BTC ratio could recover from its current 0.03 to above 0.05.

IV. Risks and Uncertainties

Despite the optimistic outlook, Ethereum ETFs face two major risks. First, regulatory uncertainty: SEC Chair Gary Gensler recently reiterated concerns about the crypto market. If the SEC rejects applications on grounds of "market manipulation," ETH could see a sharp correction. Second, competitive pressure: ETF applications for other public chains like Solana and Avalanche are also advancing. If they gain approval before Ethereum, they could divert capital.

Additionally, Ethereum's own upgrade timeline is worth monitoring. If the "Pectra" upgrade, originally scheduled for 2025, is delayed, it could dent market confidence. According to the Ethereum Foundation, the upgrade aims to improve network scalability, but a specific timeline has not been set.

V. Conclusion: Three Conditions Needed to Sustain the Rally

Overall, the approval of an Ethereum spot ETF is one of the biggest catalysts for the crypto market in 2025. For ETH to sustain the momentum from BTC's rally, three conditions must be met: first, ETF approval by May; second, sustained net capital inflows post-approval that outweigh GBTC selling pressure; and third, a new growth driver in the Ethereum ecosystem, such as real-world asset (RWA) tokenization.

Currently, the first two conditions are materializing, but the third remains to be seen. For investors, ETH's long-term value depends on its evolution from a "digital asset" to "digital infrastructure." The ETF is just the starting point, not the finish line.

Risk Warning

The above content is for reference only and does not constitute investment advice. The cryptocurrency market is highly volatile, and the approval outcome, price trends, and capital flows of Ethereum ETFs are subject to uncertainty. Investors should make prudent decisions based on their own risk tolerance.